Fed created 'gross distortions,' says Ron Paul

Former Rep. Ron Paul, R-Texas, discusses the taper's influence on inflation and the Fed's next move.

Former GOP presidential candidate Ron Paul told CNBC on Thursday that investors should not be fooled by the Federal Reserve's "little" taper, as it is still manipulating the price of money and interest rates.

The Fed said Wednesday that the economy was strong enough for the central bank to begin scaling back its bond-buying program, but Paul called the taper too little, too late.

"There are still structural problems in the economy, and it's all related to monetary policy, and of course regulations and spending by our Congress," he said on "Squawk on the Street."

"They say they're going to taper, which means they have to buy less. … But then the Fed says, 'Well, we're going to guarantee that interest rates won't rise.' "But how do you keep interest rates from rising? You have to buy stuff," he said. "In some ways it's a little bit schizophrenic.

"This whole policy of pretending that they're having major changes, and not buying quite so many bonds, and buying short term bills instead—[that] could change in a minute," Paul added.